Houston—The Electric Reliability Council of Texas on Dec. 16 forecast it will have a reserve margin of 15.5% in the summer of 2021, up from summer 2020's 12.6% but down from the May forecast of 17.3% for summer 2021, which weakened summer forwards.
ERCOT's latest Capacity, Demand and Reserves Report, issued twice a year, also forecast a new record peakload of 77,244 MW, blowing through the existing 74,820-MW record set Aug. 12, 2019.In a Dec. 16 email, Travis Whalen, a power market analyst at S&P Global Platts Analytics said, "The drop in load expectations could be categorized as a surprise, since we didn't account for such a large drop, but it's hard to argue with it since we've seen very weak load growth everywhere but far west and [Gulf] coast (likely due to LNG demand)."
Summer 2021 and 2022 forwards fell sharply on the Intercontinental Exchange the morning of Dec. 16. The ERCOT North Hub July-August 2021 package fell about $3.25 to trade around $74.25/MWh, and the July-August 2022 package fell $5.50 to trade around $52.50/MWh.
RESERVE MARGIN FORECAST CHANGESThe latest summer 2021 reserve margin forecast is down from the May CDR forecast "due to solar and wind project delays and cancellations," ERCOT said in a news release.
The summer 2022 forecast is for a 27.3% reserve margin and others are forecast to exceed 25% at least through 2025. In the May forecast, the 2022 reserve margin was forecast at 19.7%, which decreased incrementally to 14.1% by 2025.
ERCOT's target reserve margin is 13.75%, designed to ensure that a capacity-related blackout occurs no more often than one day in 10 years.
Manan Ahuja, Platts Analytics senior director of North American power, expressed surprise at the lower reserve margins for summer 2021.
"Our expectations are of more robust reserve margins - about 17%," Ahuja said in a Dec. 16 email. "The reserve margins post-2021 in the CDR are too high, though. We are likely to continue to hover in the teens as per our [Platts Analytics] forecast."
The Public Utility Commission of Texas in 2016 directed ERCOT to develop a new reserve margin standard based on the concept of an economically optimal reserve margin and a market equilibrium reserve margin.
A Dec. 1 draft study by Astrape Consulting determined the EORM to be 11% and the MERM to be 12.25%, presuming equilibrium to be achieved by 2024.
EORM is "the reserve margin level at which system costs are at their lowest when considering the costs of maintaining system reliability and building new generation capacity," an ERCOT presentation states.
ERCOT defines MERM as "the reserve margin at which developers in the long term can be expected to at least break even when investing in new plant capacity."
PEAKLOAD FORECAST CHANGESERCOT's Dec. 16 CDR news release points out that in addition to organic customer demand growth, the transfer to ERCOT of the Lubbock Power & Light 100,000-customer base, in June 2021 would tend to increase ERCOTs peakload. LP&L has about 470 MW of load being transferred to the ERCOT system.
Platts Analytics' Ahuja said, "It is reasonable to expect higher peak load as ERCOT loads have been increasing recently despite COVID impacts," but added that Platts Analytics forecasts the summer 2021 peak at 876.8 GW.
And Whalen said ERCOT should set new peakload records each year, if normal weather prevails, but "that 3-GW [peakload] increase would be the largest we've seen in some time at a time when the economy is in a tenuous place."
"I'd put my money on peak load coming in lower, but any meaningful stimulus and/or recovery in the economy combined with persistent higher residential cooling load from a new work from home environment could make this number plausible," Whalen said.
In addition to organic customer demand growth, the addition of the Lubbock Power & Light customer base in June 2021 would tend to increase ERCOTs peakload, ERCOT said. The portion of LP&L's customer base that is switching to ERCOT would have a peakload of about 470 MW, according to filings at the Public Utility Commission of Texas.
ERCOT has approved resources totaling 1,917 MW of installed capacity since the May CDR.
The summer 2021 reserve margin assumes that resources not yet approved for commercial operation could add 5,620 MW of capacity available at peak, which includes 816 MW of gas-fired generation, 1,765 MW of wind resources and 3,039 MW of utility-scale solar. ERCOT expects 9,273 MW of summer-rated solar capacity to be added by June 2022.
ERCOT plans to release its preliminary Seasonal Assessment of Resource Adequacy for summer 2021 in early March, which will incorporate the latest weather forecasts, including drought conditions. A final SARA for summer 2021 would follow in May.
